Corporate Welfare Spending Reaches $98 Billion in FY 2012

Brian Koenig |
Sep 6, 2012, 2:10 p.m.

The number of corporate welfare dollars doled out to the private sector is on the rise, as a startling new report released by the Cato Institute uncovered that federal subsidies distributed to private businesses in Fiscal Year 2012 cost taxpayers a whopping $100 billion.

“That includes direct and indirect subsidies to small businesses, large corporations, and industry organizations,” the libertarian think tank noted in its policy analysis.

Corporate welfare, which largely consists of government-sponsored loans or subsidies distributed to the private sector, has spiked under the Obama administration, with the majority of dollars streaming from the departments of Energy, Agriculture, Commerce and Housing and Urban Development.

While there is no absolute formula to determine the federal government’s total corporate welfare bill, Cato budget analyst Ted DeHaven formulated a number of $98 billion for Fiscal 2012.

Washington bureaucrats attempt to justify this gross misuse of taxpayer dollars through the guise of economic or environmental “necessity” — when often is the case, they are recompensing constituents or other special interests who’ve helped spring them into office.

The now-defunct solar company Solyndra was supposed to encourage U.S. energy independence as well as create thousands of jobs, through a $535-million loan guarantee funneled through the Energy Department. Instead of stimulating any economic and environmental benefit, the solar panel-maker filed bankruptcy last year leaving taxpayers on the hook for a half-billion-dollar tax bill.

Free market opponents often blame capitalism for such misbehavior, when in fact, it’s government interference fueling the crime. Take, for example, the notorious demise of Enron, the company whose financial collapse sent more than 20 people to prison.

“Enron Corporation is a poster child for the harm of business subsidies, particularly with regard to its disastrous foreign investments,” Cato noted in its report. “Enron lobbied government officials to expand export subsidy programs, and it received billions of dollars in aid for its projects from the Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, the U.S. Maritime Administration and other agencies.”

All in all, the scandal-ridden firm harvested nearly $4 billion in corporate welfare through government agencies. Some experts have actually attributed Enron’s shady government dealings as the catalyst to its demise, as federal subsidies induced the firm to pursue extraordinarily risky foreign investments.

If this is the case, it wasn’t capitalism that burdened Enron shareholders; it was big government. Corporate welfare is the antithesis to the free market, as it leads to damaging economic distortions and a winners-versus-losers phenomenon that places large corporations at an unfair advantage.

“Policymakers claim that business subsidies are needed to fix alleged market failures or to help American companies better compete in the global economy,” affirmed DeHaven, in summarizing the report. “However, corporate welfare often subsidizes failing and mismanaged businesses and induces firms to spend more time on lobbying rather than on making better products. Instead of correcting market failures, federal subsidies misallocate resources and introduce government failures into the marketplace.”

In effect, the corporate welfarist mentality of Obama’s presidency, and many presidencies before his, has only exacerbated rising deficits and economic misfortune, while confiscating billions of dollars in wealth from hardworking Americans.

Brian Koenig is a blogger and columnist, writing about political issues and other current events. Visit his blog at www.brianekoenig.com. Send comments to brianekoe@gmail.com.